Frexit

05/03/2017

While America is obsessed with the machinations and tweets by President Trump, Europe is sailing in uncharted waters. After the devastation of two world wars during the first half of the 20th century, with tens of millions of soldiers and civilians dying, there was a dream by some prescient Europeans of a united continent, tied together economically to eliminate the threat of future wars. There was the hope that citizens of individual nations would slowly shed their garments of nationalism and wear the robes of European citizens, retaining only weak links to their homelands.

The growth of the European concept started with the ECSC- the European Coal and Steel Community of six nations, including France and Germany, founded in 1951 under the leadership of Jean Monet, its first president. In 1967, it merged with Euratom, the European Atomic Energy Community, and the European Economic Community. Together, they had a single executive body, an institutional structure, and shared a Court of Justice and Parliamentary Assembly. The Maastricht Treaty signed in 1992 sought to integrate Europe into a single unified body, the European Union. The signees included twelves countries including the economic engines of France, Germany, Italy, and Great Britain. Several other steps and treaties towards unification preceded Maastrict, among them the Treaty of Rome in 1957 and the Single European Act in 1986. The Euro, a common currency for the EU was introduced in 1999, further binding the nations of Europe together, though England continued to use the pound.

Since the founding of the EU, it has grown to twenty-nine nations with the same currency and open borders, for goods, capital, and people (Shentgen Agreement). However, the common currency has made life difficult for the countries of southern Europe, whose productivity lags that of the north. Their debt levels have grown enormously, exceeding their ability to pay back their loans without assistance, given their GDPs. Unemployment has also surged since the recession of 2007-2008 and remains at unacceptably high levels, especially among the young. And budget deficits need to be brought under permanent control. Greece is the prime example of these dilemmas, though other nations have similar, though less onerous problems. The imposed solution of austerity, in order to receive loans from the IMF and EU, has caused great hardships for the population of these nations, with little improvement in their debt levels. The obvious answer prior to the advent of the Euro would have been depreciation of national currencies to make their products more competitive relative to other nations and to boost employment. But with the Euro, this was not possible.

The Shentgen Agreement has also caused problems for the countries of the EU. With refugees pouring in to escape wars in the Middle East and Africa, and economic migrants seeking work in the more prosperous EU, difficulties have arisen. A number of nations have refused to accept these new arrivals because of cultural and religious differences, economic concerns, and the threat of terrorism. This has caused a schism in the EU and has led to the rise of nationalism and populism, with political parties wary of the EU and opposed to globalism. Eastern European states in particular have come under the sway of populism and nationalism, with Hungary and Poland now ruled by nationalist parties. So-called illiberal democracies, with one man or one party control, have reared their ugly heads, with ethnocentrism the dominant philosophy. But every state has seen variants of nationalism and populism spread, mainly because of immigration, even in a liberal nation like Denmark.

Another factor that sticks in the craw of most EU countries are the rules and regulations that emanate from the bureaucracy and parliament in Brussels. Many of these conflict with standard practices in different states, forcing them to make unwanted changes. Nations feel this is an unnecessary infringement on their sovereignty over with they have no control.

Open borders, immigration, and Brussel rules and regulations are considered responsible for Brexit last year, with Great Britain the first nation to exit the EU. Britain left in spite of warnings of negative economic consequences and the likelihood that Scotland would split with Great Britain. Blatant nationalism won out over rational choice, with a majority of English citizens wanting control of the borders and immigration. Though a shock to the EU, with British separation yet to be negotiated, continental Europe is still joined together in the EU, at least for the moment.

But will the dream survive? Russian interference in European elections with campaigns of disinformation supporting illiberal democracies are doing damage and must be neutralized. The next major test is the French runoff election between the centrist Emmanuel Macron and the far-right nationalist Marine LePen. Though Macron, who wants to keep France in the EU is favored, a victory by LePen is possible given the unpredictable emotional pull of nationalism and populism. A LePen victory would mean Frexit, with France pulling out of the EU and shattering the dream of a united Europe. If France stays, differences in the economies and debt loads of southern and eastern Europe and the prosperous north, still has to be worked out. But without France, there is no hope. An election in the fall also has to reaffirm Germany’s commitment to the EU. The tide of nationalism and populism with its support of illiberal democracies must be halted as well, if the advances in liberty and human rights realized in the 20th century are to be continued. The dream is fragile